Writing Off Loans
Loans are written off using the standard write-off processing.
Fastpath: 
Refer to The Big Picture Of Write Off Processing for background information.
We illustrate the classic financial transactions that transpire to financially write-off a loan to help illustrate important points (these are the fourth and fifth entries in the following table):
Event
GL Accounting
Effect On Current Balance
Effect On Payoff Balance
Current Balance
Payoff Balance
Loan service agreement is activated
Long Term Loan Receivable 1000
Cash <1000>
0
10,000
0
10,000
long-term: 10,000
First bill segment is produced
Interest:
Long Term Loan Receivable 41.66
Interest Revenue <41.66>
Transfer Long Term To Short Term:
Short Term Loan Receivable 438.71
Long Term Loan Receivable <438.71>
438.71
41.66
438.71
10,041.66
short-term: 438.71
long-term: 9,602.95
Payment is made (with an overpayment of 200.00)
Affect Cash
Cash 638.71
Long Term Loan Receivable <638.71>
Transfer Long Term To Short Term:
Long Term Loan Receivable 638.71
Short Term Loan Receivable <638.71>
-638.71
-638.71
-200.00
9,402.95
short-term: <200.00>
long-term: 9,602.95
Create adjustment to remove SA's credit.
Transfer Short Term Credit to Long Term:
Short Term Loan Receivable 200.00
Long Term Loan Receivable <200.00>
200.00
0
0
9,402.95
short-term: 0
long-term: 9,402.95
Sync up current with payoff balance
Transfer Long Term To Short Term:
Short Term Loan Receivable 9,402.95
Long Term Loan Receivable <9,402.95>
9,402.95
0
9,402.95
9,402.95
short-term: 9,402.95
long-term: 0
Transfer balance to a write-off SA
Transfer From Loan SA:
Write Off Xfer Clearing 9,402.95
Long Term Loan Receivable <9,402.95>
Long Term Loan Receivable 9,402.95
Short Term Loan Receivable <9,402.95>
Transfer To Write Off SA:
Bad Loans Expense 9,402.95
Write Off Xfer Clearing <9,402.95>
Note, these will cause a balance of 9,402.55 to exist on the write-off service agreement.
-9,402.95
-9,402.95
0
0
The only unusual portion of the last two financial transactions is the impact on short and long term receivables. Please see the examples above under Billing For Loans And Interest Calculation and Paying What Is Owed to understand how any impact to a loan's current balance causes this type of financial transfer to occur.